Ratio Analysis of S&S Air, Inc. Chris Guthrie was recently hired by S&S Air, Inc., to assist the company with its financial planning and to evaluate the companys performance. Chris graduated from college five years ago with finance degree. He has been employed in the finance department of a Fortune 500 company since then. S&S Air was founded 10 years ago by friends Mark Sexton and Todd Story. The company has manufactured and sold light airplanes over this period, and the companys products have received high reviews for safety and reliability. The company has a niche market in that it sells primarily to individuals who own and fly their own airplanes. The company has two models; the Birdie, which sells for $53,000, and the Eagle, which sells for $78,000. Although the company manufactures aircraft, its operations are different from commercial aircraft companies. S&S Air builds aircraft to order. By using prefabricated parts, the company can complete the manufacture of an airplane in only five weeks. The company also receives a deposit on each order, as well as another partial payment before the order is complete. In contrast, a commercial airplane may take one and one-half to two years to manufacture once the order is placed. Mark and Todd have provided the following financial statements. Chris has gathered the industry ratios for the light airplane manufacturing industry.

USING the following data

please answer the following question

Calculated ratios are as follows:

Types of ratio	Formula	Computation	Ratio
Current Ratio	current assets/current liabilities	0.75	0.75
Quick ratio	(current assest-inventory)/current liabilities	0.39	0.39
Cash Ratio	cash+cash equivalents/ current liabilities	0.15	0.15
Total Assets Turnover	net sales/total assets	1.67	1.67
Inventory Turnover	cost of goods sold/average inventory	21.43	21.43
Receivables Turnover	net sales/average receivables	43.05	43.05
Total debt Ratio	outside debt/total debt	0.45	0.45
Debt Equity Ratio	outside debt/equity	0.82	0.82
Equity Multiplier	total debt/equity	1.82	1.82
Times Interest Earned	EBIT/interest	6.36	6.36
Cash Coverage Ratio	EBIT-Depreciation/interest	9.22	9.22
Profit Margin	net incomeet sales *100	3.36	3.36 %
Return on Assets	net income/total assets *100	5.60	5.60 %
Return on Equity	net income/equity *100	10.18	10.18 %

Compare the performance of S&S Air to the industry. For each ratio, comment on why it might be viewed as positive or negative relative to the industry. Suppose you create an inventory ratio calculated as inventory divided by current liabilities. How do you think S&S Airs ratio would compare to the industry average?

Ratio Analysis of S\&S Air, Inc. Ratio Analysis of S\&S Air, Inc